Home sales continue to slow
Some economists say prices may have to give
Southwest Florida started off the second quarter with sales as dry as the first. It was in good company: nearly every large community in Florida fell by double-digits during April as the real estate market continued to shed the rapid momentum of the last several years.
Homes sales in the Sarasota-Bradenton market fell 44 percent in April when compared with the same month a year ago while Charlotte County-North Port fell 33 percent.
Read the rest of the article here: http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060526/BUSINESS/605260487
Prices have already declined. I have seen properties sell recently for prices lower than they would have sold a year ago. Some segments of the market, like condo conversions, have dropped 20% in price. I could be wrong but I believe the worst is behind us.
There are still alot of overpriced homes on the market. A property has to be priced properly to sell. No amount of advertising is going to sell an overpriced property.
Southwest Florida started off the second quarter with sales as dry as the first. It was in good company: nearly every large community in Florida fell by double-digits during April as the real estate market continued to shed the rapid momentum of the last several years.
Homes sales in the Sarasota-Bradenton market fell 44 percent in April when compared with the same month a year ago while Charlotte County-North Port fell 33 percent.
Read the rest of the article here: http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060526/BUSINESS/605260487
Prices have already declined. I have seen properties sell recently for prices lower than they would have sold a year ago. Some segments of the market, like condo conversions, have dropped 20% in price. I could be wrong but I believe the worst is behind us.
There are still alot of overpriced homes on the market. A property has to be priced properly to sell. No amount of advertising is going to sell an overpriced property.
posted by Marc Rasmussen at
1:22 PM
6 Comments:
Marc,
Thanks for the nice website.
You are one of the few realtors locally who are willing to come out and openly state that the market has slowed significantly. Most agents want to bury their heads in the sand rather than admit publicly that sales and prices have shrunk dramatically.
I'm curious why you think the worst of the decline is over when by all indications the Fed still has more rate increases planned.
Also, given that listings are somewhat static, doesn't this represent a lot of sellers who have yet to lower their asking price appropriately?
Aside from price erosion, what do you see as the catalyst for increased sales given the current conditions ?
Thanks again for your time and efforts.
Hi Todd,
Thanks for the comment. I can envision a little more softening in prices but not too much more. That is just a hunch I have. I am not basing that off of any concrete evidence. The economy is good even though this slow down in the real estate market might cause a recession. Interest rates have risen but by no means are they high. You also have to look at the demographics and the number of people moving to Florida which will bring a steady supply of home demand to the state. The decline in home prices have brought out a whole new set of buyers that were scared to invest in last years euphoria.
Some segments of the market will remain strong. The second home/condo market should do fairly well since buyers typically don't have to sell a home prior to buying. The fact that someone may need to sell a home before buying is enhancing the slow down in the market.
I agree with you that there are plenty of sellers who have incorrectly priced their home. It can be difficult to price a property these days. If you have some comparably sold properties from the last 3 months it is not that difficult. The problem is that some communities don't have any sold properties for over six months or more.
We have thousands of listings that are still priced as if we are in last years market. At some point all of these overpriced properties will either expire unsold, taken off and rented or the seller will reluctantly accept the new market and adjust the price accordingly. When the overpriced inventory is either removed or adjusted we will have a more balanced, healthier market.
Remember, during the boom times so many people became Realtors. The market has numerous part time and unexperienced agents taking listings. Many of them are just taking listings even though they are overpriced.
This market is in transition and moving quickly. That can make it difficult for buyers to act. They want to see where the market is going before making a move. I have several people looking to buy. However, they are waiting to see what the market is going to do. They are simply trying to pick a bottom which is very difficult in any market. Once the buyers feel comfortable that the market has stabilized I think they will move back in. Actually, quite a few buyers already feel that because they are purchasing. Properties are still selling. Just not as quickly as the early part of last year.
Marc,
You mentioned a few things that I'd like to address, just as a 'devil's advocate'.
1. "Interest rates have risen but by no means are they high."
Interest rates have indeed risen from levels that were artificially low several years ago. That was largely induced by the sudden end to the stock market bubble coupled with the 9/11 terrorist attacks.
A 30 year mortgage is still quite reasonable by historical standards, yet people are simply not buying at these price levels, which is worrisome.
Historically rates on a 30 year mortgage have averaged around 8%. When rates get above 9% it puts a REAL hurt on the economy.
The current Fed has to deal with so many crosscurrents (continued govt. overspending on the war and weather-related disaster cleanup, decline in the dollar, continued high energy prices causing inflation, etc) that they pretty much have no option than to continue to raise rates.
But the Fed doesn't want to send the economy into a downward spiral with higher rates so they have been absolutely flooding the financial system with new money. All that does is continue the decline in the value of the dollar - as there are more dollars out there each one in our pockets is worth less.
So the Fed is really in a no-win situation, but rates are likely still headed higher.
2...." demographics and the number of people moving to Florida which will bring a steady supply of home demand to the state."
Yes, demographics do point to increased long term demand for real estate in Florida. But that is a much longer term scenario and will likely not affect the shorter term situation.
Added to that is the huge increase in property insurance and real estate taxes. These factors are continuing to make housing affordability quite a challenge.
People are now looking at areas like Raleigh/Durham, NC, Austin, TX, and areas of Tennessee as alternatives as they are able to find much more reasonable housing prices in those markets, without the threat of hurricanes.
We're going to have to take our lumps now or later. When the recession is officially acknowledged/recognized, I think that the housing market will come to a grinding halt.
The big national home builders can see the writing on the wall and are willing to act LONG before the general public. When you open up the paper and see "96 homes in 96 Hours" type advertisements where builders are dropping prices and offerring huge incentives, you know that they see continued weakness and they're wanting to unload inventory.
3. When all those ARMs start getting adjusted upward many people will be unable to afford their payments. That is coming up around the corner, and coupled with other event, it will likely be the beginning of another leg down in the housing market, IMO.
I look forward to hearing any other views/comments.
Let me comment on:
1. "A 30 year mortgage is still quite reasonable by historical standards, yet people are simply not buying at these price levels, which is worrisome."
People are still buying. I just checked MLS for some statistics. I searched just in the Sarasota area from Longboat Key down to Casey Key. There were 1,477 single family homes and 922 condos that have sold so far this year. This number does not include new homes that have sold and any non MLS transactions. Currently, there are 477 single family homes and 528 condos under contract on MLS.
2. "People are now looking at areas like Raleigh/Durham, NC, Austin, TX, and areas of Tennessee as alternatives as they are able to find much more reasonable housing prices in those markets, without the threat of hurricanes."
This is true but there are still millions of baby boomers predicted to be buying in Florida in the next 10 years. I was speaking with a gentleman last week about this. He is from Wisconsin and already owns a 2nd home in North Carolina and is thinking of selling it and buying in Florida. He said North Carolina was pretty but he pretty much did not gain anything from leaving a cold Wisconsin in the winter to a not quite as cold but still not warm North Carolina. There will be people who pass up Florida for those states just as people will leave there and come to Florida.
3. "The big national home builders can see the writing on the wall and are willing to act LONG before the general public. When you open up the paper and see "96 homes in 96 Hours" type advertisements where builders are dropping prices and offerring huge incentives, you know that they see continued weakness and they're wanting to unload inventory."
I don't believe home builers are dropping prices because they think the market is going to crash. I believe they are dropping prices because they need to move their homes because they over built, have debt service on the land they own, employees to pay, health insurance premiums, office rent and everything else they need to pay for in order to build and sell homes. They can't simply just wait it out like a typical home seller. Many of these home builders have a pretty healthy profit margin because they purchased the land years ago and can afford to slash prices. Take a neighborhood like The Enclave in east Sarasota. 2 years ago they were selling a home for about $250k. Recently, the same home was around $450k. If they were making a profit at $250k what is their profit at $450k? I know material costs have gone up but not by that much. They can afford to slash the price of the home 50k and still make money.
3. "3. When all those ARMs start getting adjusted upward many people will be unable to afford their payments. That is coming up around the corner, and coupled with other event, it will likely be the beginning of another leg down in the housing market, IMO."
You will definitely see some people get squeezed and be forced to sell. There will also be an increase in foreclosures. I am not certain if this will cause the entire market to decline. It is possible.
Marc,
Again, you are more realistic and forthright than many others in your profession.
Differences in opinion are what drive markets. The truth often lies somewhere in between.
I hope we can get some others to chime in with their thoughts and comments as this story continues to unfold.
Best wishes to you and yours on your continued success.
Thank you Todd. I believe there are bright and dark spots for any market. Many agents only look at the bright spots and ignore the dark ones.
Again, thanks for the comments. Feel free to post anytime. I love the discussions. Perhaps I should create a forum on my website for people to discuss such topics. ;-)
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